Standard precision and aggressive financial reporting: the influence of incentive horizon

The extant literature on precision in accounting standards suggests that financial statement preparers are less likely to make aggressive reporting decisions under precise, principles-based as compared more rules-based standards. We extend this line of research by examining how the incentive horizon influences earnings management behaviour. Consistent with prior literature, we find evidence precise lead income-increasing behaviour than do when is short-term nature. However, long-term, associated reduce current income relative Importantly, findings demonstrate effects standard changed time horizon, and decision makers cannot be fully understood studied without considering timing structures.